Why Do Many EdTech Startups Fail?

Every startup has its own struggles, and education technology startups are no different. Even companies like Udemy, Coursera, and Duolingo, with over $100 million in funding, are still figuring things out as they grow. They are well known to the public and are considered the industry frontiers, and yet they are still struggling to become profitable. Several new and unknown startups have trouble succeeding, and sadly, many fail before they even start. Let’s discuss some of the most common reasons why this happens.

Lack of market understanding

The education market is quite diverse and unique, and many startups fail to realize this. In the case when a startup is selling B2B products, it is not only school representatives who are buying the product. Startups also need to consider the kids and teachers who would use the product regularly, not to mention parents who may have an entirely different point of view. In the case of B2C products, the company is competing with several other companies with similar or the same products. Even if the product features vary slightly, the customer value is often still the same. And just as in other competitive industries, it is crucial to set a price for the product that maximizes your profits while remaining attractive to customers.

Startups expect high growth right from the start

There are several industries in which companies can look forward to high growth, such e-commerce, taxi businesses, or local businesses without nearby competition. Education is a field where technology has a lot to offer but affects several interested parties, and because of that, change is coming slower. This affects startups offering their product to these companies, too. It might take 15–20 years of hard work to achieve greater impact and hyper growth.

It might take five years for the product to fit the market

Some people might argue that Coursera and Khan Academy have millions of users and are quite popular. But what most of those people are forgetting is that most of their users are not paying for those services. In the education technology industry, it takes the time to create a model, set pricing, and implement strategies effectively, and many startups don’t do this and fail. A startup that plans to succeed should focus its attention on surviving as long as possible and testing various strategies, so they can decide what works for them and what doesn’t.

Many startups start with a wrong revenue model

As previously stated, startups rush right to the success and skip crucial steps needed for them to succeed. One of these steps is getting to know the stakeholder really well, and using that knowledge to create an appropriate revenue model. For example, parents love quality products at affordable prices and educational institutions like unique products that can be bought at a low price and sold at a higher price. Based on these desires, a startup can see what it can do best and make the offer to beat the competition.

Early traction is interpreted incorrectly

Startups that get good initial traction make the wrong assumption it will continue. Being optimistic, they base future predictions based on this growth, and it makes things worse. Initial customers are often evangelistic people who are willing to try new products and give feedback. As soon as the new product launches, those people are nowhere to be found. It’s the next set of customers that is crucial for startups. These customers are usually less optimistic and more skeptical but are willing to try the product. These are the customer’s startups should listen to the most because those customers will provide some earnest feedback on how to improve the product, which might help gain more traction in the future. Startups should focus on their paying customers instead of their initial customers, and this can be a serious problem for most EdTech companies with good initial traction and inaccurate predictions for the future.

EdTech might be a hard market to enter, but it is also one with many great opportunities, as long as the startup company knows the written and unwritten rules of the market.

3 comments

Most firms experience failures and closure due to poor planning and a mistake that most people make, foreseeing what would happen in the future based on trends in the market.The baseline is poor management or a reluctant one that does not do thorough market research and also inadequate funding hence lack of resources to assure growth and expansion instead extinction takes place.
Thanks for having the courage to shed light on this matter.

It’s sad to see the failure of a start-up after a very short period of time but we must face the reality these things happen and we must learn from our own mistakes.As business owner, a prudent leader seeks advice and consultation from different stakeholders before coming up with a product and launching a business.
Thanks Mathew for the interesting piece.

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